Newling v FSS Trustee Corporation (No 2)

1. [1]

   These proceedings concern a claim for a total and permanent disability benefit under a life insurance policy. The plaintiff, Kim Newling, is a former officer of the New South Wales Police Force. In May 2012 she was discharged from the Force on medical grounds.

2. [2]

   The first defendant, FSS Trustee Corporation (“FSS”) is the trustee for the First State Superannuation Scheme (“the Fund”), which provides superannuation benefits for, among others, members of the New South Wales Police Force. Ms Newling was a member of the Fund.

3. [3]

   The Fund provided members with death and permanent disability benefits in addition to superannuation benefits. It did so by obtaining insurance cover for its members’ benefit. For the purposes of this case the relevant insurance was provided by a Group Life Insurance policy issued by the second defendant MetLife Insurance Limited (“MetLife”). The policy was issued to FSS in its capacity as trustee for the Fund. FSS was therefore the insured under the policy but exercises its rights as insured in the interests of Ms Newling as the Fund member.

Terms of the policy

1. [4]

   The insuring clause in the policy provided:

2. [5]

   The policy was triggered by the happening of an Insured Event. That term was defined as meaning:

3. [6]

   Two levels of benefit were provided by the policy:

4. [7]

   The term “TPD” was defined as “Total and Permanent Disablement” in the following terms:

5. [8]

   Sub-paragraph (b) is the relevant part of the definition for present purposes. It required that the Insured Member be absent from their occupation through injury or illness for six consecutive months. Ms Newling went on sick leave on 2 September 2011 and, as events turned out, did not return to work. A potential complexity arose because FSS allowed the policy to expire as from 30 September 2011. But MetLife accepted that, the Insured Event and the period of absence from work having commenced before that date, the policy continued to apply to Ms Newling’s claim despite its expiry.

6. [9]

   In the course of the claim assessment process, a question was raised as to whether Ms Newling met the requirement of her “Normal Hours” having been fifteen hours a week or more at the time of the Insured Event. But at the hearing MetLife accepted that this condition was satisfied.

7. [10]

   The six month period referred to in sub-paragraph (b) expired on 2 March 2012. It was agreed between the parties that the question whether Ms Newling satisfied the requirements of sub-paragraph (b) was to be determined as at that date, even though the actual assessment might (and in this case, did) take place after that date.

8. [11]

   It follows that the underlying issue, as now agreed between the parties, is whether Ms Newling had, as at 2 March 2012, “through injury or illness … become incapacitated to such an extent as to render [her] unlikely ever to engage in any gainful profession, trade or occupation for which [she was then] reasonably qualified by reason of education, training or experience”. Ms Newling was required to provide “proof to [MetLife’s] satisfaction” of this.

9. [12]

   Clause 9 of the policy dealt with disputed benefits. It relevantly provided:

Issues for determination

1. [13]

   Usually, trust law would require the trustee, who is the insured, to bring any proceedings against the insurer under the policy; the Insured Member would have no standing to do so. But, as explained in TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [53]-[55], claims of the type made in this case are a recognised exception to this general rule. In effect, Ms Newling as plaintiff sues in these proceedings to enforce the rights of the trustee as insured. If she succeeds the insurer will pay the benefit to the trustee who will then account for it to her. FSS has played no active part in the proceedings. No point was taken about this by MetLife.

2. [14]

   It is common ground that Ms Newling’s claim under the policy must be analysed in accordance with the “two stage” approach described in Shuetrim at [157]-[158]. The terms of the policy do not require MetLife to pay unless proof to its satisfaction has been presented that the claim is valid. MetLife has not formed any such view. The first stage of the analysis requires that Ms Newling demonstrate that MetLife’s failure to be so satisfied involved a breach of its obligations as insurer. If, but only if, this is established, the Court moves to the second stage of determining whether the conditions of the policy were in fact satisfied (describing the second stage in this way is sufficient for present purposes but may involve an oversimplification: see [226]-[237] below).

3. [15]

   In 2017, MetLife made an application to the Court for the first stage to be dealt with separately and in advance. The application came before me in the Applications List. Ms Newling consented to it. Following amendments to the pleadings designed to clarify the issues to be determined at the first stage hearing, the parties agreed on separate questions and I made orders accordingly: Newling v FSS Trustee Corporation [2017] NSWSC 1839. The hearing on the separate questions, as it happened, came back before me.

Background

1. [16]

   Ms Newling was born in July 1970. She completed her Higher School Certificate and left school at the end of 1988. In 1989 she obtained a job with GIO (a general insurance underwriter) as a claims manager working on fraudulent, or allegedly fraudulent, insurance claims.

2. [17]

   In around 1990 Ms Newling formed a de facto relationship from which she later had two children. She and her de facto husband established a home at Prospect in western Sydney.

3. [18]

   Ms Newling left GIO and joined the Police Force in 1991. She was promoted to Senior Constable in April 1997. In November 1997 she fell down a flight of stairs at work, injuring her back. She returned to work with the Police Force but her work was restricted to light duties. She was attached to the Blacktown Command and worked in intelligence at a desk job. She returned to her full pre-injury hours, which appear to have been about thirty hours per week.

4. [19]

   Ms Newling and her de facto husband married in 2000 but the marriage ended in 2001. After that she continued to live, as a single mother, at the former matrimonial home in Prospect.

5. [20]

   Ms Newling made a workers’ compensation claim for disability arising out of her fall in 1997. The claim was settled (apparently in 2001, but the year is not stated in the terms of settlement). The terms of settlement provided for Ms Newling to receive compensation for a fifteen per cent impairment of her back and a five per cent impairment of her right leg, but for an award in favour of the Police Force with respect to her left leg.

6. [21]

   In June 2004 Ms Newling was transferred to the Marine Area Command at Balmain. She continued to work at a desk job in the intelligence area. She was promoted to Sergeant in May 2005. She worked on a flexible roster, reportedly working on average seventy-four hours per fortnight.

7. [22]

   Between December 2008 and May 2009 Ms Newling took three periods of leave totalling approximately eleven weeks. This was a combination of sick leave, annual leave and “extended” leave. She was reportedly certified by her general practitioner, Dr Lucia Bong, in May 2009 as being fit only for restricted duties at reduced hours of two six-hour shifts per week. The certificate itself does not appear to be in evidence. The reasons for this leave are discussed further below.

8. [23]

   Ms Newling returned to work on 17 May but then took a further four weeks of leave in June. The beginning of this period of leave coincided with the hospitalisation of her son. When she returned to work in July, Ms Newling submitted a police incident notification form stating that she had sustained back spasms while sleeping over at the hospital. Hospital records (not themselves in evidence) reportedly show the date in question was 8 June. Ms Newling made a workers’ compensation claim as a result, based on aggravation of her earlier back injury.

9. [24]

   When Ms Newling returned to work in May 2009, Inspector Jennifer Thommeny had been appointed as her supervisor. Ms Newling came into conflict with Ms Thommeny concerning her requests for leave and her restricted working hours. Ms Newling claimed that this amounted to workplace bullying and harassment. Ms Thommeny’s superior, Superintendent Hutchings, was drawn into the dispute and seems eventually to have supported Ms Thommeny.

10. [25]

    In August 2009 Ms Newling consulted Dr Bong and was diagnosed with “anxiety/depression” as a result of alleged workplace harassment. Dr Bong certified her as unfit for work and she went off work from 28 August. Ms Newling was referred to Dr Selwyn M Smith as her treating psychiatrist. He first saw her on 11 September and diagnosed her as having “Adjustment Disorder with Depressed and Anxious Mood”.

11. [26]

    Dr Bong also referred Ms Newling to Dr Kwok, a neurosurgeon, concerning her back complaints. Dr Kwok saw her on 28 September. He concluded that further conservative treatment of her back would not help and surgery was suggested. He advised Ms Newling on the likelihood of success and possible complications but she did not then, or later, take up this suggestion.

12. [27]

    Ms Newling apparently made a further workers’ compensation claim as a result of her psychiatric diagnosis. But Dr Smith later reported:

13. [28]

    It appears that Ms Newling remained off work until December 2009 when her leave entitlements ran out. Dr Smith later reported that he thought that Ms Newling was not well enough to return to work but because of her “severe financial hardship” he acceded to her request to return to work on restricted duties.

14. [29]

    In February 2010, Ms Newling saw Dr Scougall, an orthopaedic surgeon, at the request of Baker & Edmunds, a firm of solicitors who appear to have been acting for her on her workers’ compensation claim. He diagnosed her as having chronic back pain with “non verifiable radiculopathy symptoms in her left leg” (not her right leg which was the subject of the earlier award). At the time Ms Newling was reportedly continuing to work on restricted hours of two seven hour days per week. The claim for aggravation of Ms Newling’s back injury was declined in May 2010 on the ground that any such aggravation did not arise out of, or in the course of, Ms Newling’s employment. Ms Newling apparently challenged this decision. She saw Dr Scougall again at the request of Baker & Edmunds in September 2010 and he repeated his diagnosis and opinion on causation.

15. [30]

    In October 2010 Ms Newling saw Dr Crowle, an occupational physician at the request of the Police Force, for the assessment of a proposed return-to-work plan. At the time, Ms Newling was still attached to the Marine Area Command but her hours were still seven hours per day, two days per week, with a travel restriction of no more than twenty minutes. As a result of this travel restriction, she was working from an office at Prospect where she was provided with a workstation allowing for remote communication with the Marine Area Command.

16. [31]

    Dr Crowle diagnosed Ms Newling as having a “history of chronic back pain and left S1 radiculopathy”. Dr Crowle recorded that Ms Newling had chosen to proceed with surgical treatment for her back as recommended by Dr Kwok. Ms Newling was hoping to succeed in overturning the refusal of her workers’ compensation claim, which would presumably have paid for the surgery. Dr Crowle recommended that should her appeal not succeed, she should discuss treatment options with her treating practitioners. Dr Crowle instanced the possibility of going on a public waiting list for surgery or being referred to a pain management specialist or clinic.

17. [32]

    Reportedly Ms Newling later increased her work hours to three seven-hour days per week, but subsequently reduced them to two five hour days per week, complaining of increasing pain, before she went off work for what proved to be the final time in September 2011.

18. [33]

    There is no direct evidence about the later course of Ms Newling’s workers’ compensation claims. Reportedly, the refusal of her claim for psychiatric injury was later reversed in the Workers’ Compensation Commission (see [43] below). There is no evidence as to whether the “appeal” to which Dr Crowle referred concerning Ms Newling’s back injury succeeded, but orthopaedic evidence was still being obtained concerning her back in 2014 (see [82]-[83] below).

Evidence before MetLife concerning TPD

1. [34]

   Ms Newling’s TPD claim was lodged in April 2012. It consisted of two forms. One was a “medical statement” signed by Dr Bong on 1 March. The other was a “statement of claim” signed by Ms Newling on 20 March, which was accompanied by a separate form dealing with Ms Newling’s educational background and a vocational assessment questionnaire.

2. [35]

   Attached to the medical statement were two medical certificates from November 2011 which had originally been prepared for workers’ compensation purposes. One was from Dr Bong. It recorded a diagnosis of “severe chronic low back; severe anxiety depression diagnosed [illegible symbol] adjustment disorder”. Dr Bong certified that Ms Newling was unfit to return to the Police Force and should be medically discharged. Dr Bong also certified that Ms Newling had reached “maximum medical improvement”.

3. [36]

   The second certificate was from Dr Smith. It recorded a diagnosis of “Adjustment Disorder with Depression and Anxious Mood”. Dr Smith certified that Ms Newling’s employment was in his opinion a substantial contributing factor to this injury. He also certified that Ms Newling had reached “maximum medical improvement” and that in his opinion she was not fit to return to the Police Force and should be medically discharged.

4. [37]

   The term “maximum medical improvement” is one used for the purpose of assessment of injury for the purpose of workers’ compensation claims. It is defined in the Workcover Guide for the Evaluation of Permanent Impairment as occurring:

5. [38]

   The opinions recorded in these certificates were not supported with any reasoning. They simply involved the doctor ticking a box or writing a few words on the form.

6. [39]

   A number of reports prepared for the purposes of Ms Newling’s workers’ compensation claim had come into MetLife’s possession by January 2013. Two of these were from Dr Crowle and two from Dr Smith. The first of Dr Crowle’s reports was her report on the proposed return-to-work plan for Ms Newling in October 2010 (see [30]-[31] above). At the time she was seen by Dr Crowle, Ms Newling was working under restrictions certified by Dr Bong which imposed a lift limit of five kilograms and periods of travel of no more than twenty minutes, periods of standing of twenty minutes at a time and hours of work limited to seven hours a day, two days a week, not being consecutive. The return-to-work plan is not in evidence but was described by Dr Crowle. It involved returning Ms Newling to “normal hours”. It was accompanied by a list of restrictions which in effect would have limited Ms Newling’s duties to desk work without contact with members of the public and working in an office setting close to her home.

7. [40]

   Dr Crowle agreed with Dr Bong’s certifications. She expressed the view that the plan was not realistic as Ms Newling was unlikely, in Dr Crowle’s view, to be able to increase her hours of work. From the context, it is clear that this opinion was based on Ms Newling’s then condition and took no account of the surgery she had decided to undergo if her workers’ compensation appeal succeeded. Among the answers to the questions which were asked of Dr Crowle were these:

8. [41]

   Dr Crowle’s second report was prepared for Employers Mutual Limited in March 2012. It was based on an assessment undertaken on 29 February 2012. Dr Crowle stated:

9. [42]

   Under the heading “Summary” Dr Crowle stated:

10. [43]

    The first of Dr Smith’s reports was prepared for Employers’ Mutual Limited in January 2012. Dr Smith stated:

11. [44]

    In April 2012, Dr Smith wrote a further report for Baker & Edmunds. The report set out Dr Smith’s whole person impairment evaluation according to Workcover guidelines. His evaluation was twenty-one per cent. For “employability” Dr Smith classified Ms Newling as having “severe impairment” and stated:

12. [45]

    The first medical report specific to Ms Newling’s TPD claim was provided by Dr Smith in October 2012. It was prepared in response to a request from MetLife in August.

13. [46]

    Dr Smith’s report contained a detailed history of the events leading up to the diagnosis which he made in September 2009, and in particular the dispute between Ms Newling and her superiors, Ms Thommeny and Mr Hutchings. Under the heading “Clinical Examination” Dr Smith stated:

14. [47]

    Under the heading “Psychiatric Opinion” Dr Smith stated:

15. [48]

    Dr Smith continued:

16. [49]

    Dr Smith then recounted Ms Newling’s complaints about the way Ms Thommeny dealt with her over rostering. Ms Newling’s complaints included that Ms Thommeny continually adopted an “abrupt and intimidating manner”; that she felt “confused and badgered”; and that she:

17. [50]

    Dr Smith continued:

18. [51]

    Dr Smith continued:

19. [52]

    Dr Smith went on to respond to twelve questions posed in MetLife’s letter requesting the report. Relevant questions (in italics) and answers were as follows:

20. [53]

    Having received Dr Smith’s report, MetLife obtained expert reports on Ms Newling’s claim from its own consultants. Reports were obtained in February 2013 from Dr Paul Robinson, an orthopaedic surgeon, and from Dr Bradley Ng, a psychiatrist.

21. [54]

    Dr Ng saw Ms Newling on 1 February 2013. He was provided with Ms Newling’s application; the workers’ compensation reports from Dr Crowle (October 2010 and March 2012) and from Dr Smith (January and April 2012); and Dr Smith’s October 2012 report to MetLife. Dr Ng recorded his findings on mental state examination as follows:

22. [55]

    Under the heading “Summary and Assessment”, Dr Ng stated:

23. [56]

    Dr Ng then addressed various questions that he had been asked and gave answers which included the following:

24. [57]

    Dr Robinson, the orthopaedic surgeon retained by MetLife, saw Ms Newling on 5 February. Dr Robinson did not specifically identify the material provided to him for his report, but I assume it was the same as that provided to Dr Ng. Dr Robinson recorded the following under “Activities”:

25. [58]

    Following his examination, Dr Robinson reported his opinion as follows:

26. [59]

    In March 2013 a vocational assessment report was obtained from an organisation known as Rehab Management. Ms Newling was seen by Carly Donaghey, a rehabilitation consultant, on 19 March. Ms Donaghey’s report recorded the following under “Functional Tolerances”:

27. [60]

    Under “Other health concerns” Ms Donaghey recorded that Ms Newling was taking medication for hypertension. Ms Newling stated that her blood pressure continued to fluctuate and resulted in occasional symptoms of headaches, fatigue and chest discomfort.

28. [61]

    The report recorded that Ms Newling was not seeking work. It identified a number of skills based on Ms Newling’s education, training and employment which would be transferrable to other occupations. The report concluded:

29. [62]

    Further details of each of these occupations were provided in the supplementary report provided in May. The supplementary report contained a review of employment vacancies from an internet review for the inner city region of Sydney.

30. [63]

    Meanwhile, MetLife had surveillance carried out on Ms Newling. Ms Newling moved to Pottsville, on the far north coast of New South Wales, towards the end of 2012, where she continues to live. Surveillance footage was obtained of her there in January 2013 and then in May/June 2013.

31. [64]

    The footage obtained in January 2013 included a visit to a shopping centre at Robina over the border in Queensland. Ms Newling was described in the accompanying report as having walked in and out of numerous stores for two hours during this visit. The surveillance reports for May/June included a visit to a local shopping centre on 30 May where footage was obtained of her pushing a shopping trolley and carrying grocery items and of walking her dog on 3 June, in the course of which she was reported to have bent at the waist to pick up the dog. The dog was a small one. Footage was also obtained of her visiting shops and a petrol station on 4 June.

32. [65]

    MetLife then obtained further reports from its doctors. In his further report of July 2013, Dr Ng referred to Dr Robinson’s February report, to the surveillance reports and the vocational assessment report. He stated that he had reviewed the videos provided. He stated:

33. [66]

    Dr Robinson was also invited to reconsider his report. He was provided with the surveillance material, the vocational assessment report and Dr Ng’s updated report. He reviewed and commented on the video surveillance. He relevantly reported his opinion as follows:

34. [67]

    MetLife then invited Dr Smith to respond. For the purpose of his response, Dr Smith was provided with the reports from Dr Ng, Dr Robinson and Rehab Management, and also with the surveillance reports. Dr Smith began by commenting on the Rehab Management report:

35. [68]

    Dr Smith’s comment on the video surveillance was:

36. [69]

    Dr Smith’s response to Dr Ng’s reports was:

37. [70]

    Dr Smith’s comment on Dr Robinson’s reports was:

38. [71]

    Dr Smith’s conclusion was:

39. [72]

    MetLife’s file also contained a short medical report prepared by Dr Bong in November 2012. The report referred only to Ms Newling’s back pain; it did not refer to her having any psychiatric condition. The report stated:

40. [73]

    The report appears to have been prepared in answer to a series of questions. The questions are not in evidence nor is there any other evidence to explain the circumstances in which the report was written. The evidence does not appear to identify when the report came into MetLife’s possession.

41. [74]

    MetLife’s file also contained a lengthy statement, described as a “Psych Report Statement” prepared by Ms Newling with the assistance of her parents and forwarded to MetLife in February 2014. About six weeks later Ms Newling sent to MetLife an email attaching a further report from Dr Smith addressed to the general practitioner Ms Newling was visiting after her move to Pottsville, Dr Ramana Panda. Ms Newling’s email indicated that a report was also being prepared on her claim from Dr Panda, but if such a report was completed, it is not in evidence. The evidence does not otherwise indicate the context in which Ms Newling’s statement and Dr Smith’s report were prepared.

42. [75]

    Ms Newling’s statement began:

43. [76]

    Ms Newling went on to say this about shopping:

44. [77]

    Ms Newling referred to her move to Pottsville:

45. [78]

    Ms Newling went on to complain of financial insecurity, the protraction of “this matter” and the “ongoing attendance at medical consultations for reports”. The statement does not identify what these consultations were, and they may have included consultations concerning Ms Newling’s workers’ compensation claim. Ms Newling did not attend any consultations with MetLife’s experts about her TPD claim after February/March 2013.

46. [79]

    Dr Smith’s report was dated 20 March 2014. It was very short, stating:

47. [80]

    MetLife’s file also contained a number of other orthopaedic reports which appear to have been provided by Ms Newling’s solicitors in March 2015 (see [116] below). These included five reports from Dr Scougall from 2010 and two further orthopaedic reports from 2014.

48. [81]

    Dr Scougall’s diagnosis in his 2010 reports is set out at [29] above. He assessed Ms Newling as having a fifteen per cent permanent impairment of her back and a seven per cent impairment of her left leg.

49. [82]

    The first 2014 report had been obtained from Dr Roger Pillemer, an orthopaedic surgeon, by Baker & Edmunds in August 2014, for the purposes of Ms Newling’s workers’ compensation claim. Dr Pillemer assessed Ms Newling as having a twelve per cent whole person impairment. He recorded that surgery had been discussed with her previously but she was very reluctant to consider it “at the present time”. He concluded:

50. [83]

    In September 2014 Ms Newling was the subject of a medical examination and report by Dr Vijay Panjratan, another orthopaedic surgeon. Dr Panjratan saw Ms Newling at the request of a firm of solicitors, Bartier Perry. The evidence does not directly reveal for whom they were acting; presumably it was for the insurer in Ms Newling’s workers’ compensation claim. Dr Panjratan answered a series of questions posed by Bartier Perry. The questions and answers included the following:

Assessment of claim

1. [84]

   In March 2015, MetLife wrote to Ms Newling (with a copy to FSS). The letter was referred to in the proceedings as the “procedural fairness letter”. It stated:

2. [85]

   The letter included two lists of documents (including for this purpose, DVDs recording surveillance footage). The first apparently contained the documents which MetLife considered relevant to the assessment. The second list was a subset of the first. The documents in it were said to be drawn to Ms Newling’s attention as containing “possible adverse information”. The documents identified were:

3. [86]

   FSS passed the letter on to Ms Newling’s solicitors, Walter Madden Jenkins (“WMJ”). After obtaining copies of some of the relevant documents on 23 April, WMJ sent a letter in the form of submission to FSS. FSS then forwarded the submission to MetLife.

4. [87]

   The submission was nine pages long. WMJ provided a number of further reports which they requested MetLife to take into consideration. These included five 2010 reports from Dr Scougall and the 2014 reports of Dr Pillemer and Dr Panjratan (see [82]-[83] above).

5. [88]

   After some preliminary comments about the test to be applied by the insurer, WMJ’s submission addressed the evidence under five headings, which corresponded with the material which had been identified in MetLife’s procedural fairness letter as containing potentially adverse information (as set out at [85] above).

6. [89]

   Dr Robinson’s July 2013 report: WMJ’s submission argued that the July 2013 report should not be viewed in isolation from Dr Robinson’s earlier report of February 2013. WMJ quoted from the earlier report about Ms Newling’s housework being restricted and being unable to undertake even sedentary work (see [58] above). WMJ also quoted Dr Crowle’s opinion from her March 2012 workers’ compensation report that Ms Newling was not at the time fit for work with the Police Force or with any alternative employer (see [41]-[42] above).

7. [90]

   WMJ acknowledged that Dr Robinson’s opinion had changed after he viewed the surveillance footage and he now believed that Ms Newling had no serious physical problem, but argued that this view was contrary to the 2014 workers’ compensation reports from Dr Panjratan and Dr Pillemer (see [82]-[83] above). The submission also picked up the observations made by Dr Smith that pain was “very subjective” and that it was “very difficult to state with any certainty” that it was being overstated (see [70] above). On the strength of this, WMJ submitted that Dr Robinson’s doubts about Ms Newling’s symptoms should be disregarded.

8. [91]

   WMJ also referred to the “long-standing and well documented nature” of Ms Newling’s back injury. WMJ stated that Ms Newling had been restricted to thirty hours per week because of her back injury, and that the further reduction in her hours in 2009 (see [22] above) was a response to an increase in lower back pain.

9. [92]

   WMJ submitted by reference to Dr Pillemer’s 2014 report that improvement could not now be expected. WMJ said:

10. [93]

    Dr Ng’s reports: WMJ’s submission referred to Dr Ng’s conduct having been the subject of a complaint by Ms Newling, without identifying the complaint or any significance it might have had. WMJ quoted Dr Ng’s remarks about Ms Newling being under-treated (see [55]-[56] above) and his opinion that there was no psychiatric barrier to Ms Newling working outside the Police Force for up to twenty-four hours per week (see [56] above). In response, WMJ quoted Dr Smith’s opinions to the contrary ([69] and [79] above) and submitted that as the treating practitioner Dr Smith’s view should be preferred. WMJ added:

11. [94]

    WMJ next referred to Dr Ng’s question as to the validity of Ms Newling’s reported symptoms (see [65] above). In response, WMJ relied on Dr Smith’s response concerning the video surveillance (see [68] above). WMJ repeated the point that Dr Smith was the treating doctor and submitted that the doubts raised by Dr Ng “should be completely disregarded”.

12. [95]

    WMJ next referred to the opinion in Dr Ng’s July 2013 report that there was no psychiatric disorder preventing Ms Newling from undertaking the occupations identified by Rehab Management in a part or full-time capacity (see [65]) above). In response, WMJ quoted Dr Smith’s response disagreeing with Dr Ng (see [69] above) and again repeated that Dr Smith was in a better position to make assessments of Ms Newling’s treatment, credibility and capacity for employment as her treating psychiatrist.

13. [96]

    Rehab Management reports: WMJ pointed out that during the interview with the vocational assessor, Ms Newling had been noted as standing intermittently throughout the interview and also leaning against the wall or pacing slowly (see [59] above). Of the four jobs identified as suitable by Rehab Management, WMJ noted that Dr Ng and Dr Robinson thought that Ms Newling could work as an administration officer or a personal/executive assistant, but while Dr Ng thought that she could work as a court/legal clerk, Dr Robinson had noted that this might reawaken some of her psychological problems (see [66] above). This was said to be a disagreement between the two doctors. WMJ also noted that Dr Robinson had not commented on whether Ms Newling could work as a client services officer.

14. [97]

    WMJ then quoted from Dr Smith’s opinions in his reports of April 2012 (see [44] above) and October 2012 (see [52] above) which accepted that Ms Newling might have the capacity to engage in work outside the Police Force to a limited extent. WMJ stated that this conclusion had been “qualified” in Dr Smith’s August 2013 report and quoted his opinion doubting “very much” that Ms Newling would “relate” as a court/legal clerk or customer service officer and observing that although she would have been able to work in a supportive environment “as an administrative officer or executive or personal assistant”, he was “most doubtful” she would improve to a sufficient extent to do so (see [67] above).

15. [98]

    WMJ continued:

16. [99]

    WMJ also referred to anxious, agitated and tearful behaviour of Ms Newling recorded by Dr Smith and Dr Ng and submitted that this would cause difficulty in dealing with the public or maintaining concentration. WMJ quoted what Dr Robinson recorded in his February 2013 report about Ms Newling’s inability to work in a sedentary position (see [58] above). The report also noted Dr Smith’s most recent opinion from March 2014 that Ms Newling was incapable of engaging in any employment (see [79] above).

17. [100]

    Surveillance: WMJ noted that out of one hundred and thirteen hours of surveillance over twenty days, there had been only seven confirmed sightings of Ms Newling and only just over sixty-nine minutes of footage had been obtained. WMJ quoted Dr Smith’s observation that one of the unconfirmed sightings was, according to Ms Newling, definitely not her. In response to Dr Robinson’s comment about Ms Newling picking up her dog (see [66] above), WMJ argued that this was only one action and it was “very difficult to tell from only a video the extent of the pain this caused our client”. WMJ referred to Dr Scougall’s report of February 2010 stating that although Ms Newling could bend and pick up a light article from the floor she did that cautiously in order to protect her back (see [29] above).

18. [101]

    WMJ also drew attention to Dr Smith’s comments that Ms Newling was not seen either smiling or laughing in any of the footage; that this was consistent with his own observations of her; that the video did not depict Ms Newling’s social avoidance and agoraphobic symptoms; and that video surveillance was unlikely to demonstrate the prevalence of a psychiatric disorder. WMJ concluded:

19. [102]

    Dr Smith’s October 2012 report: WMJ acknowledged that in his October 2012 report Dr Smith accepted the possibility that Ms Newling could engage in work outside the Police Force. But WMJ argued that this opinion should be understood in the context of his other reports. WMJ quoted the statements of opinion in Dr Smith’s January workers’ compensation report that Ms Newling did not have the capacity to work outside the Police Force, and in his April 2012 workers’ compensation report that Ms Newling was unable to work more than one to two days at a time or more than twenty hours per fortnight and might “have difficulty engaging” on the open labour market (see [44] above). WMJ noted that Dr Smith’s October opinion was only that Ms Newling may have the capacity to engage in alternative work to a limited extent (see [52] above). WMJ observed that Dr Smith had said that Ms Newling would require further rehabilitation and observed that no such rehabilitation appeared to have been undertaken. WMJ continued:

20. [103]

    WMJ referred to Dr Smith’s August 2013 opinion that given the length of time Ms Newling had experienced symptoms he was doubtful that she would improve to any significant extent and indeed that she would not return to some form of employment (see [67] above). WMJ also quoted Dr Smith’s opinion in March 2014 that Ms Newling was incapable of engaging in any employment (see [79] above). WMJ repeated the point that as Ms Newling’s treating doctor, Dr Smith was the most qualified practitioner to express an opinion and to disregard this latest opinion when no more recent evidence to the contrary had been served was “totally inappropriate”.

21. [104]

    WMJ’s conclusion was:

22. [105]

    WMJ’s submission ended by calling on MetLife to determine the claim quickly:

23. [106]

    About three weeks later, on 15 July, MetLife wrote to Ms Newling care of FSS. The letter stated that MetLife had “concluded the enquiries we considered were required for our assessment of your claim”. The letter went on to state:

24. [107]

    Accompanying the letter was a number of enclosures including (bold in original):

25. [108]

    The Information Summary was thirty-eight pages long. It consisted of a table, each row of which represented a document. One column was headed “Content” and summarised or extracted relevant information. Another was headed “MetLife Comment” and extracted relevant material or directly commented on the document.

26. [109]

    The Information Summary contained a number of comments by MetLife concerning the surveillance. Referring to what Dr Crowle recorded in her report of March 2012 concerning Ms Newling’s need to use an umbrella as a walking aid (see [41] above), MetLife commented:

27. [110]

    Against Dr Smith’s August 2013 report the Information Summary commented:

28. [111]

    Against Ms Newling’s statement of February 2014 (see [74]-[78] above) the comments were:

29. [112]

    The Information Summary also contained a comment on the vocational assessment report and the reported functional tolerances of Ms Newling being able to stand or sit for less than five minutes:

30. [113]

    Against Dr Pillemer’s report of August 2014 recording that Ms Newling was very reluctant to undergo surgery, the comment was:

31. [114]

    Under the heading “Our Assessment”, MetLife’s letter set out seven paragraphs under the heading “For TPD” and fourteen paragraphs under the heading “Against TPD”.

32. [115]

    In support of TPD, MetLife stated that Dr Smith had “continually maintained that you would not be able to return to employment due to your psychological symptoms”. In particular, MetLife referred to Dr Smith’s April 2012 workers’ compensation assessment stating that Ms Newling was experiencing ongoing symptoms of anxiety and depression (see [44] above) and his August 2013 opinion that the surveillance footage did not negate her psychiatric symptoms or complaints and maintaining that it was doubtful she would return to alternative employment (see [67] above).

33. [116]

    MetLife also noted Dr Crowle’s March 2012 opinion that Ms Newling’s lower back condition rendered her unfit to return to work (see [42] above); Dr Bong’s March 2012 medical certificate that Ms Newling had reached maximum medical improvement and had no capability for work (see [35] above); Dr Panda’s reported opinion that Ms Newling was incapable of engaging in any employment (see [74] above); and Dr Pillemer’s opinion that it was unlikely that Ms Newling could be gainfully employed at the time of his report (see [82] above). MetLife also noted from Dr Pillemer’s report that Ms Newling was very reluctant to undergo the back surgery which had been recommended to her.

34. [117]

    Against TPD, MetLife’s letter stated:

35. [118]

    MetLife went on to refer to Dr Robinson’s reports:

36. [119]

    MetLife then referred to Dr Ng’s reports:

37. [120]

    MetLife’s letter continued:

38. [121]

    Under the heading “The FSS Policy” the letter then stated:

39. [122]

    The letter ended by inviting Ms Newling to provide any further information she considered supported her TPD claim or to make any submissions she wished “about the information provided with this letter”. A period of twenty-eight days was given.

40. [123]

    On 14 August MetLife wrote to FSS noting that there had been no response to its letter of 15 July. Under the heading “Our Decision”, the letter stated:

41. [124]

    The letter invited FSS or Ms Newling to contact MetLife’s Dispute Resolution Officer if “the trustee or the member has additional information that may affect our decision or if the trustee or member is unhappy with our decision”. The letter also offered a further review under what was described as MetLife’s “Internal Dispute Resolution Process” (which I assume was a reference to a review by the Claims Review Committee under clause 9 of the policy, quoted at [12] above). The letter noted that there might be a referral available to the Financial Ombudsman Service if the review by the Claims Review Committee did not resolve the claim.

42. [125]

    On 18 August WMJ wrote to FSS with a response to MetLife’s letter of 15 July. Most of WMJ’s letter was taken up with the question of whether Ms Newling satisfied the requirements for “Normal Hours” which has now fallen away (see [9] above). The letter went on to assert that MetLife was, and had for some considerable time, been in possession of sufficient information to enable it to determine the claim in Ms Newling’s favour and asked that the claim be determined “immediately”. Although there was no evidence of this in the Court Book, I was informed that the letter was forwarded by FSS to MetLife.

43. [126]

    On 9 November FSS sent an email to MetLife containing further representations on Ms Newling’s behalf by way of response to MetLife’s decision to decline the claim. FSS expressed the opinion that, on the evidence, Ms Newling met the policy definition for TPD as at the relevant date (2 March 2012). After stating that MetLife had to consider not only Ms Newling’s physical capacity but the realities of the labour market in deciding whether there was “no real chance” or it was “probable” the member would ever work again, FSS stated:

44. [127]

    In support of this argument, FSS referred to the opinions expressed by Dr Smith in his reports of January 2012 (see [43] above), April 2012 (see [44] above), October 2012 (see [45]-[52] above) and August 2013 (see [67]-[71] above). FSS also referred to Dr Bong’s “report” (actually the Workcover Certificate) of March 2012 (see [34]-[35] above) and Dr Bong’s report of November 2012 (see [72] above). FSS made the point that Dr Smith was Ms Newling’s long-standing treating psychiatrist and Dr Bong was Ms Newling’s long-standing GP and the opinions of both “should have some weight”.

45. [128]

    FSS also noted the opinion of Dr Crowle in her report of March 2012 (see [41] above). FSS noted that four jobs had been identified and that both Dr Ng and Dr Robinson believed Ms Newling could return to some employment, FSS asserted that neither doctor had considered “the relevant definition of TPD or the real world likelihood of [Ms Newling] obtaining any of the roles identified”. FSS also referred to Dr Smith’s statement that he was “most doubtful” that Ms Newling would improve in regard to her capacity to undertake such work (see [67] above).

46. [129]

    FSS invited MetLife to reconsider its position. MetLife was asked to decide within 14 days and FSS stated that it considered there was adequate evidence on the file for the review to be conducted based on the reports already obtained.

47. [130]

    On 7 January MetLife wrote to FSS stating that it had reviewed FSS’ email and responding to some of the points made in that email. In connection with the reports of Dr Ng and Dr Robinson, MetLife stated:

48. [131]

    MetLife’s response concerning Dr Smith was:

49. [132]

    MetLife next stated, under the heading “The member’s claimed disabilities”:

50. [133]

    Under the heading “Other medical evidence” MetLife stated:

51. [134]

    The letter ended by stating that MetLife “maintains the opinion previously given” namely, that Ms Newling did not satisfy the TPD definition in the policy. The letter reminded FSS that should Ms Newling remain dissatisfied following a review under the Internal Dispute Resolution Service, she might wish to pursue the matter with the Financial Ombudsman Service.

52. [135]

    I was informed by counsel that Ms Newling exercised her right to a review by the Claims Review Committee, but neither party put any evidence before the Court about the issues raised in the review or the decision of the Committee (which obviously must have affirmed MetLife’s decision). These proceedings were commenced in June 2016.

Breach of MetLife’s obligations as insurer

1. [136]

   Ms Newling’s Statement of Claim pleads that in determining her TPD claim MetLife owed her an obligation of good faith and fair dealing, and that MetLife was obliged to act reasonably in making its decision. In substance these obligations are admitted in MetLife’s defence.

2. [137]

   The Statement of Claim pleads that MetLife declined Ms Newling’s claim in its letter of 14 August 2015 (see [123] above) and, having “purportedly reconsidered the claim”, declined it again on 7 January 2016 (see [130] above). The Statement of Claim alleges that in declining the claim, MetLife “breached its duty” to Ms Newling, failed to act reasonably, and formed an opinion that was not open to MetLife having acted reasonably and fairly. This is alleged to have vitiated MetLife’s decisions.

3. [138]

   The judgment of McLelland J in Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 remains the classic statement of an insurer’s obligations in deciding whether to accept or decline a claim under a policy where a liability to pay is conditional on the insurer being satisfied of the validity of the claim. The insurer is obliged both to act reasonably in making the decision and to act with the utmost good faith in handling the claim, including, but not limited to, the actual process of decision-making (at 77,536). But where matters of judgment are involved, according to his Honour, the insurer’s decision cannot be impeached merely because the Court would have reached a different conclusion (ibid).

4. [139]

   In Ziogos v FSS Trustee Corporation (2016) 19 ANZ Ins Cas 62-094; [2015] NSWSC 1385, Ball J said (at [74]):

5. [140]

   In Hannover Life Re of Australasia Ltd v Jones (2017) 19 ANZ Ins Cas 62-149; [2017] NSWCA 233 the Court of Appeal had to consider conflicting arguments about how the reasonableness of an insurer’s opinion in a TPD case such as this one should be assessed. The claimant argued that reasonableness was to be assessed objectively: that is, in accordance with the Court’s view, based on the material before the insurer. The insurer argued that the assessment was limited to asking whether the insurer in making the decision had been guilty of Wednesbury unreasonableness (from the administrative law decision in Associated Provincial Houses Ltd v Wednesbury Corporation [1948] 1 KB 223): that is, the decision had to stand unless it was so unreasonable that no reasonable insurer could have made it.

6. [141]

   Gleeson JA, who gave the leading judgment, rejected the claimant’s submission that the assessment was objective. He said (at [89]):

7. [142]

   On the other hand, Gleeson JA rejected the insurer’s submission that Wednesbury unreasonableness had to be established. He said (at [121]):

8. [143]

   Macfarlan JA agreed with Gleeson JA, although he added in brief concurring remarks at [3] that the difference between “Wednesbury unreasonableness” and the test adopted by Gleeson JA at [121] “would produce different results in few, if any, cases”. Meagher JA also agreed that a decision which failed the test stated by Gleeson JA at [121] would involve a breach of the insurer’s implied obligation to act reasonably and fairly, but he pointed out at [9] that this was not the only ground on which the insurer’s opinion might be held to be of no contractual effect.

9. [144]

   In my view, the effect of this decision is clear. The Court of Appeal has explicitly adopted a test of unreasonableness which requires a plaintiff to demonstrate that the decision in question was not open to “an insurer” acting reasonably. That test is not specific to the particular insurer in question, as Ball J stated in Ziogos. If the decision is one which could have been made by an insurer acting reasonably, then it must be sustained.

10. [145]

    The allegations of breach put forward on behalf of Ms Newling can be grouped under five headings:

11. [146]

    Counsel for Ms Newling submitted that MetLife never actually made a decision on Ms Newling’s claim. Counsel pointed to the negative form of wording in MetLife’s letters of 14 August 2015 (see [123] above). Counsel submitted that in saying that it “had not formed the opinion” that Ms Newling was relevantly incapacitated, MetLife had left the claim up in the air.

12. [147]

    The contention that MetLife had not actually decided Ms Newling’s claim was pleaded by way of amendment to the Statement of Claim when the orders for separate hearing was made and was picked up in one of the agreed questions (see [238] below). But it is contrary to the pleaded allegations in the Statement of Claim that MetLife declined the claim in August 2015 and again in January 2016, which were not amended. In any event, I think it is unsound.

13. [148]

    The policy required that proof be provided to MetLife’s satisfaction of the relevant incapacity. MetLife had no obligation to assemble such proof for itself; and so, for practical purposes, it was up to Ms Newling to do so: see Ziogos at [28]; Shuetrim at [63]. In this sense, the onus lay on her. In saying in its formal letter declining the claim of 14 August that it had “not formed the opinion” that Ms Newling was relevantly incapacitated, MetLife was only saying, perhaps clumsily, that it was not satisfied on the material presented to it that Ms Newling was so incapacitated. I think this is quite clear from the context, in particular from the way in which it was expressed in MetLife’s earlier letter of 15 July: see [121] above. An argument based on similarly worded correspondence declining a claim was rejected in Shuetrim at [114].

14. [149]

    The insurance contract contained no express obligation on MetLife to give reasons for its decision, or indeed to make its decision reasonably and fairly. The obligation to act reasonably and fairly arose by implication. Any obligation to give reasons for decision must have arisen by way of a further implication. In my view, it is one thing to say that an insurer must decide the claim reasonably and fairly, but it is another thing entirely to say that the insurer then owes a further obligation to give reasons for the decision so as to satisfy the insured claimant that the decision was actually reasonable and fair. The latter step requires justification.

15. [150]

    In Ziogos, Ball J said (at [75]), immediately after the paragraph I have quoted at [139] above:

16. [151]

    The statement that MetLife’s duty of good faith required it to give reasons for its decision was cited with approval in Carroll v United Super Pty Ltd [2018] NSWSC 403 by Slattery J at [102]. Counsel for Ms Newling relied on it to submit that, as the letter of 14 August contained no reason for the insurer’s conclusion that the claim was not established, the decision was invalid for that reason alone.

17. [152]

    I think that there are difficulties with counsel’s submission that the duty of good faith necessarily carries with it an obligation to give reasons. It is true that the submission was supported by what Ball J said in Ziogos. But that conclusion was expressly said to follow from his Honour’s earlier conclusion that it was not enough for the insurer’s decision to be within the range of decisions reasonably open to insurers generally. As I have said, I think that this aspect of Ball J’s decision has been overruled by the Court of Appeal. If it is sufficient for the decision in question to be open to “an insurer” acting reasonably and fairly, then an inability to understand what the insurer’s particular process of reasoning was, does not necessarily mean that breach is established. The Court can decide whether the decision falls within the permissible range without knowing the specific reasoning process followed by the insurer.

18. [153]

    Although I was not referred to administrative law authorities on the duty to give reasons, I think they have some application by analogy. In Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; [1949] HCA 26, Dixon J was considering a statutory appeal where the taxpayer company was required, in order to sustain a deduction it claimed, to establish to the Commissioner’s satisfaction that the continuity of ownership test was passed (Income Tax Assessment Act 1936 (Cth), s 80(5)). Representations were made to the Commissioner but he disallowed the objection, giving no reasons. Dixon J said (at 360):

19. [154]

    A court is obliged to give reasons for its decision. Where there is a right of appeal, the court is obliged to give reasons, and to give them sufficient detail to demonstrate how it reached its conclusions, because otherwise the right of appeal would be nugatory: Pettitt v Dunkley [1971] 1 NSWLR 376 at 388. Even where there is no appeal a court is generally required to give reasons “as an incident of the judicial process”: Housing Commission NSW v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386; see also Wainohu v New South Wales (2011) 243 CLR 181; [2011] HCA 24 at [54].

20. [155]

    But in Public Service Board (NSW) v Osmond (1986) 159 CLR 656; [1986] HCA 7, the High Court held that, in general, administrative decision-makers have no obligation to give reasons for their decisions, even if such decisions affect citizens’ rights. The leading judgment was given by Gibbs CJ. His Honour concluded that the institutional characteristics which require reasons for judicial decision-making are not present in administrative decision-making, and no duty arises to give reasons to enable judicial review (at 667).

21. [156]

    In Campbelltown City Council v Vegan & Ors (2006) 67 NSWLR 372; [2006] NSWCA 284, Basten JA (with whom McColl JA agreed) said (at [106]):

22. [157]

    Gibbs CJ recognised in Osmond (at 670) that there may be a “special case” where a decision-maker would be obliged to give reasons. But any such obligation must arise, expressly or by implication, from the governing legislation. And not every right of appeal necessarily carries with it an entitlement to a statement of reasons. If the appeal involves a full rehearing, its exercise is not impeded by the absence of reasons for the initial decision: Vegan at [104], referring to Priestley JA’s judgment in Osmond in the Court of Appeal ([1984] 3 NSWLR 447 at 485).

23. [158]

    In Vegan itself, the Court of Appeal concluded that an obligation to give reasons did arise by implication from the relevant statute. The decision turned very much on the context within which the administrative tribunal in question, a medical appeal panel under the Workplace Injury Management and Workers Compensation Act 1998 (NSW), operated. In particular, an approved medical specialist, whose decisions were subject to review by the appeal panel, was under an obligation to give reasons; and there was provision for a matter to be referred to assessment more than once, including by a court or the Workers Compensation Commission (see at [115]-[116]).

24. [159]

    I think these decisions provide guidance in the present case. The institutional obligations which attach to judicial decision-making are even less applicable to an insurer’s decision on a policy claim, which is a matter of private law, than they are to administrative decision-making. And if the fact that an administrative decision may be subject to judicial review does not give rise to a general obligation to give reasons, nor can the fact that an insurer’s decision may be challenged for unreasonableness or unfairness.

25. [160]

    Just as, in administrative law, any obligation to give reasons must arise expressly or by necessary implication from the governing statute, so any obligation on an insurer to give reasons must rise expressly or by necessary implication from the terms of the policy. In the present case there was no right of appeal from MetLife’s decision. Indeed, MetLife’s decision was not even the final step. Clause 9 provided for a review of MetLife’s decision to the CRC. This review was not an appeal and the CRC was not constrained by any requirement to identify error in MetLife’s original decision. In my opinion, there was no necessary implication that MetLife give reasons for its decisions.

26. [161]

    As the observations of Dixon J in Avon Downs, as applied by analogy in an insurance context, show, this conclusion does not mean that an insurer’s decision can be made unreviewable by withholding any statement of the reasons for it. Furthermore, the process of reasoning by which an insurer reaches its decision is a fact like any other. If the insurer issues a statement of reasons, that will normally be accepted as evidence of what the reasoning process was. But that cannot prevent evidence being given to prove the insurer’s reasons were in fact different. By the same token, a failure to issue a statement of reasons should not prevent proof of what the reasons were in some other way, for instance by an internal minute, or by direct oral testimony from the officer or officers responsible for the decision, or by inference from other evidence. Counsel’s submission would require the Court to treat the insurer’s decision as vitiated whenever the insurer failed to issue a formal set of reasons even if the Court were actually satisfied by reference to other evidence that the insurer had not acted unreasonably or unfairly in making the decision in question.

27. [162]

    Consistently with this, earlier authority has treated an insurer’s failure to give reasons as having an evidentiary significance. If the insurer fails to give any reasons for making its decision, it may not be clear what material the insurer took into account and how the insurer reached its adverse conclusion. In such circumstances, the Court may more readily be persuaded that the insurer failed to give proper consideration to the issues which arose: Ross v NRMA Life Ltd (1993) 7 ANZ Ins Cas 61-170 (at 77,964); see also Hannover Life Re of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123; [2005] NSWCA 214 at [33]. Similar inferences from a failure to give reasons have been drawn in administrative law cases: Osmond at 663-664. Inferring breach from a failure to give reasons may not be available in all cases, particularly in the light of the test stated by the Court of Appeal in Jones. But if a failure to give reasons is relevant at all, it is relevant in this way.

28. [163]

    Even if I considered that MetLife was under an obligation to give reasons, the obligation to give reasons could not be more extensive than the obligation of the medical panel considered by the High Court in Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 (it might arguably be less). In that case the obligation required no more than an explanation of “the actual path of reasoning” by which the conclusion was arrived at (see [48], [55]).

29. [164]

    Counsel for Ms Newling contended that for the purpose of this argument the Court should ignore the content of the insurer’s letter of 15 July. Technically counsel was correct in submitting that this letter did not purport to be a final statement of reasons. But in my view it would be quite artificial to evaluate MetLife’s decision in the absence of this letter. The letter must in turn be understood in the context of the submissions made by WMJ in answer to MetLife’s procedural fairness letter of March 2015, and the competing expert reports of Dr Robinson and Dr Ng on one hand and Dr Smith on the other.

30. [165]

    Dr Robinson had considered Ms Newling’s claim from an orthopaedic point of view and Dr Ng had considered it from a psychiatric point of view. Both doctors had expressed a view, for reasons given in their reports, that Ms Newling did not satisfy the TPD definition. Whether or not MetLife relied on additional factors (see [210]-[217] below), I think it is clear enough from the context that MetLife was saying that Ms Newling’s claim was not sufficiently persuasive to overcome the contrary views of Dr Robinson and Dr Ng. Counsel for Ms Newling in fact acknowledged in written submissions that the reports of Dr Robinson and Dr Ng “constitute the primary basis” for MetLife’s refusal of the claim.

31. [166]

    For these reasons, even if MetLife had an obligation to give reasons, I would not have found that it had breached that obligation.

32. [167]

    In Ms Newling’s Statement of Claim, one of the particulars of breach of duty was that MetLife, in considering and forming its opinion on her claim, failed “to give due regard to [her] interests”. Of course, the fact that MetLife’s decision was adverse was itself enough to make it, in a sense, contrary to Ms Newling’s interests; but I take the allegation to be that MetLife failed to afford Ms Newling a reasonable and fair process for the assessment of the claim.

33. [168]

    It may be accepted that, as the process of assessing the claim was under MetLife’s control, MetLife was obliged to adopt an assessment procedure which gave Ms Newling a full and fair opportunity to prove her claim to MetLife’s satisfaction. This included both defining the issues under consideration and presenting the evidence which bore on those issues.

34. [169]

    In Ziogos, Ball J said at [78]:

35. [170]

    Similar considerations apply in this case. The process of assessment did not begin in earnest until Metlife’s procedural fairness letter of March 2015 (see [84] above). From that point forward, Ms Newling was represented by WMJ. WMJ responded to the procedural fairness letter and to MetLife’s subsequent correspondence on Ms Newling’s behalf. In doing so, WMJ made submissions on Ms Newling’s behalf as to the proper approach to the assessment, having regard to the relevant terms of the policy. No question of MetLife having to explain to Ms Newling the basis on which the assessment was undertaken arises.

36. [171]

    Before obtaining its own medical advice, MetLife sought and obtained from Dr Smith, Ms Newling’s treating psychiatrist, a report addressing the capacity issues which arose. MetLife later provided to Dr Smith copies of the reports it obtained from Drs Robinson and Ng and from Rehab Management. Dr Smith thus had a fair opportunity to respond to the material obtained by MetLife, and did so. Although WMJ noted that Ms Newling made a complaint about Dr Ng’s conduct when he saw her for assessment purposes in February 2013, nothing was put before MetLife to explain or justify that complaint. Counsel for Ms Newling did not submit that Dr Ng, or any of the other experts retained by MetLife for the purposes of their assessment, was in some way biased against Ms Newling; far less that MetLife should have been aware of this.

37. [172]

    The surveillance evidence was clearly disclosed as potentially adverse to Ms Newling’s representatives by MetLife (see [85] above). Responses were provided to it by Dr Smith and by WMJ on Ms Newling’s behalf. It was up to WMJ to decide whether some response to the surveillance footage should be made by Ms Newling herself, perhaps in the form of an explanatory statement. No such response was made. In my view the potentially adverse material was plainly disclosed to Ms Newling and she had a full and fair opportunity to respond to it.

38. [173]

    It was not suggested by WMJ that MetLife ought to obtain any further medical evidence for the purposes of its assessment. In particular, it was not suggested by WMJ that MetLife should obtain expert evidence addressing the orthopaedic and occupational issues by way of response to the reports of Dr Robinson or Rehab Management from any of the other doctors who had treated, or been consulted by, Ms Newling. To the contrary, both WMJ and FSS pressed MetLife to determine the application promptly based on the existing material (see [105] and [129] above).

39. [174]

    Counsel submitted at various points that MetLife had pre-determined its response to Ms Newling’s claim. I reject these submissions. MetLife gave Ms Newling a full and fair opportunity to present her case. I am not satisfied that MetLife unfairly or unreasonably disregarded her interests. This ground of complaint is not made out.

40. [175]

    The first complaint on Ms Newling’s behalf under this heading was stated in the particulars of breach as:

41. [176]

    This ground refers to the statement in MetLife’s letter to FSS of 7 January 2016, in which it reaffirmed its decision to decline Ms Newling’s claim, that Dr Smith had not commented on the surveillance footage of Ms Newling’s “lengthy shopping excursion” to Robina (see [131] above).

42. [177]

    Counsel for Ms Newling submitted that this statement was simply incorrect. Counsel pointed out that Dr Smith had in fact referred to the surveillance of the visit to Robina in his report of August 2013, observing that it did not depict Ms Newling smiling or laughing; that she was not window shopping; and that it had not recorded an incident during the visit where she overreacted towards her children (see [68] above).

43. [178]

    Read literally the statement that Dr Smith had not “commented” on the excursion to Robina was incorrect. But I think the statement must be read in context. It reflected the more detailed comment made in the Information Summary which accompanied MetLife’s letter of 15 July 2015 (see [108]-[112] above). The thrust of that comment was that the Robina surveillance contradicted Ms Newling’s claims that she was unable to walk and stand for extensive periods and that she needed an umbrella as a walking aid (see [109] above). This was a point going to whether Ms Newling’s claims of disability were reliable. I think it was open to say that Dr Smith did fail to comment on this point in his report. The observations he made did not really address it.

44. [179]

    I therefore do not accept that MetLife approached Dr Smith’s report on the incorrect assumption that he had not seen the surveillance. In fact, MetLife was well aware that he had seen the surveillance and relied upon his failure to comment on a point which emerged from it. But even if MetLife was proceeding on some sort of mistaken basis, to make a mistake or accidentally to overlook something in the course of assessment is not necessarily a breach of an insurer’s obligation to conduct the assessment fairly and reasonably.

45. [180]

    MetLife’s comment appeared clearly in the Information Summary which was sent, together with MetLife’s assessment of her claim, to Ms Newling for response. If WMJ considered that the point being made about the surveillance in some way reflected a misunderstanding on MetLife’s part about whether Dr Smith had seen the surveillance footage, or what his opinion was about it, any misunderstanding could readily have been addressed. WMJ had in fact already mentioned Dr Smith’s comments on the Robina surveillance in their prior submission (see [101] above) but they did not take issue with the comment in the Information Summary. In my opinion, there would have been nothing unfair or unreasonable in MetLife proceeding on the basis that the point made in the Information Summary had not been answered.

46. [181]

    In any event, this point was only one of the examples MetLife gave in its letter in support of the view expressed in its letter of 7 January for what it described as Dr Smith’s propensity to disregard objective information. In evaluating whether this conclusion was reasonably open to MetLife, Dr Smith’s opinions must be considered as a whole. I address this further below.

47. [182]

    The second contention on behalf of Ms Newling concerning the assessment of Ms Newling’s condition was more general. The complaint was particularised as “Preferring, without sound reasons for doing so, the opinions of medical experts engaged by the second defendant over the opinions of the plaintiff’s treating doctors”.

48. [183]

    The assessment of the medical evidence, and the resolution of any conflicts in it, were essential aspects of any decision of Ms Newling’s claim. It may be accepted that MetLife had an obligation to undertake that aspect of the assessment in a way which was fair and reasonable. But the formulation of this ground, in referring to a lack of “sound reasons” for “preferring” the opinions of MetLife’s medical experts to those of Ms Newling’s treating doctors, tends to put an incorrect slant on the process.

49. [184]

    As explained above, the onus lay on Ms Newling in the sense that she was required to put forward material proving her claim to MetLife’s satisfaction. In some cases, if there is a defect or deficiency in the material put forward by the claimant, the question may arise whether the insurer has an obligation to draw that defect or deficiency to the claimant’s attention before making a decision. But, for reasons already given at [167]-[174] above, no question of that type arises in this case.

50. [185]

    There was no dispute that Ms Newling had at least a degree of impairment as a result of her back injury. What was in issue was the extent of her disabilities, both physical and psychiatric, and in particular their effect on whether she was, in March 2002, disabled from working again. These questions were critically dependent upon self-reporting by Ms Newling, as well as being matters of judgment and opinion. MetLife was not obliged to accept everything that was said by Ms Newling or on her behalf. MetLife was entitled to be doubtful or even sceptical if doubt or scepticism was reasonably open.

51. [186]

    In these circumstances, it is wrong to suggest that the only question before MetLife was whether its doctors’ opinions were preferable to those of Ms Newling’s doctors. To frame the question in that way presupposes that the case presented by Ms Newling’s doctors was complete and compelling. It is also wrong to suggest that MetLife needed to have “sound reasons” for reaching conclusions other than those reached by Ms Newling’s doctors. MetLife was not obliged to approach the assessment on the footing that the material put forward by Ms Newling prima facie established her claim and the onus lay on MetLife’s doctors to rebut it.

52. [187]

    It is convenient to deal first with Ms Newling’s alleged disability resulting from her back injury. There was no dispute that the back injury resulted in some degree of ongoing pain and loss of sensation in Ms Newling’s foot. The question was the effect of this on Ms Newling’s ability to work.

53. [188]

    Dr Crowle said in her March 2012 report that Ms Newling’s low back condition “independently renders her unfit for work and this situation is likely to continue in the foreseeable future unless there is an improvement in her clinical status” (see [42] above).

54. [189]

    Counsel also referred in this context to WMJ’s submission (see [91] above) which sought to place this in the context of long-standing difficulties, culminating in the leave taken by Ms Newling in 2008-2009. But on the evidence, that submission was questionable on a factual level.

55. [190]

    Ms Newling’s reported work hours with the Marine Area Command of seventy-four hours per fortnight (see [21] above) equated to thirty-seven hours per week, which was full-time or virtually so. The histories recounted by Dr Scougall and Dr Crowle, and their references to the periods of leave taken by Ms Newling in 2008-2009 suggested that the leave related to her back condition. But Dr Smith’s report to MetLife in October 2012 presented a different picture. Dr Smith did refer to episodes of back pain when Ms Newling was working at the Marine Area Command but his description did not suggest that these episodes were limiting her regular work hours (Court Book, p. 139). Dr Smith referred to the eleven weeks of leave taken between December 2008 and 17 May 2009 in the context of complaints by Ms Newling of high blood pressure, headaches, exhaustion and general illness apparently unrelated to her back condition (Court Book, p. 140). The way Dr Smith referred to the period of leave commencing on 1 June 2009 suggested that it was initially taken because of her son’s hospitalisation and was then extended because of a back complaint (Court Book, p. 141). This was, of course, consistent with Ms Newling’s allegation that her back condition was aggravated when she was sleeping over at the hospital on 8 June.

56. [191]

    Dr Crowle seems to have been told, or assumed, that when Dr Bong certified that Ms Newling was fit only for restricted duties in May 2009, this was on account of her back condition. But that was not the impression created by Dr Smith’s report to MetLife, which further suggested that Ms Newling’s period of leave from 28 August to December 2009 was attributable to the psychiatric condition Dr Smith had diagnosed (Court Book, p. 143-144). Nor does it sit comfortably with the allegation by Ms Newling of aggravation of her back injury at the hospital, which only took place on or after 8 June. Dr Scougall in his report of September 2010 pointedly drew attention to inconsistencies between what he was told by Ms Newling about the date of her hospital visits and what the hospital records showed (Court Book, p. 163-164). And it is clear from reading between the lines of Dr Smith’s account that Ms Newling’s superior in the Police Force, Ms Thommeny, was treating her leave applications with scepticism.

57. [192]

    It is unnecessary for the Court to try to get to the bottom of whether this scepticism was justified, nor was it necessary for MetLife to do so. In my opinion, it was reasonably open to MetLife to proceed as it did by obtaining an expert orthopaedic opinion from Dr Robinson which directly addressed the TPD policy issues. Once MetLife had done so, it was under no obligation to give decisive weight to Dr Crowle’s earlier opinion, especially when that might only lead to further inquiry about the circumstances in which the opinion was given.

58. [193]

    Counsel for Ms Newling criticised Dr Robinson’s conclusions. Counsel argued that the surveillance constituted an insufficient basis for doubting that Ms Newling had back problems as she claimed.

59. [194]

    These submissions overlook two points about Dr Robinson’s reports. First, Dr Robinson’s conclusions were not wholly based on the surveillance. In his assessment of Ms Newling which took place in February 2013, before he had seen the surveillance reports, Dr Robinson reported that Ms Newling’s “subjective problems” were disproportionate to the objective findings of his examination” (see [58] above).

60. [195]

    The second point is that it was not MetLife’s responsibility itself to try to make a medical assessment of Ms Newling’s disability. Dr Robinson reported having viewed the surveillance footage himself. Having examined Ms Newling about six months beforehand, he was in an ideal position to judge whether the footage was inconsistent with her earlier presentation. MetLife was entitled to rely upon reputable medical opinion, and I am not persuaded that there was any reason why MetLife should have second-guessed Dr Robinson’s opinions in this regard (in passing, I note that neither party submitted that I should myself view the surveillance footage, and I have not done so).

61. [196]

    It is true, as counsel for Ms Newling pointed out, that Dr Smith responded to Dr Robinson’s report. But in doing so Dr Smith limited himself to highlighting what Dr Robinson said about Ms Newling’s alleged psychiatric condition (see [70] above). Dr Smith acknowledged Dr Robinson’s expertise on orthopaedic matters and specifically deferred to that expertise, as properly he needed to. Counsel also referred to the 2014 reports from Dr Pillemer and Dr Panjratan but those reports addressed a separate issue and did not consider the surveillance footage. Counsel submitted that MetLife should have sought a response to Dr Smith from Dr Crowle, but no such suggestion was made to MetLife by WMJ at the time.

62. [197]

    In these circumstances, there was no direct response from an orthopaedic expert to Dr Robinson’s report. For practical purposes, Dr Robinson’s observations of Ms Newling when he examined her in February 2013, and his conclusions in July 2013 having seen the surveillance, were unchallenged. In my opinion, MetLife was under no obligation to accept, in the face of Dr Robinson’s views, that Ms Newling’s ongoing back problems were themselves disabling.

63. [198]

    Counsel for Ms Newling criticised MetLife’s observation that Ms Newling was unwilling to have the back surgery which had been recommended by Dr Kwok (see [26] above). Counsel submitted that it showed that MetLife had rejected the opinions of Dr Crowle and Dr Bong that Ms Newling was disabled on the basis that the disability would be ameliorated by surgery.

64. [199]

    It is not clear that MetLife’s observation was essential to its decision. Dr Robinson rested his opinion on Ms Newling’s actual condition and did not take into account a possible improvement from surgery. It is therefore not essential to deal with this submission. However I do not think it is sound.

65. [200]

    I do not think counsel’s submission as to Metlife’s reasoning process is correct. I think it is more likely that MetLife’s observation reflected the comment made in the Information Summary (see [113] above) which was directed to Ms Newling’s credibility. The point MetLife was making was that one would expect that if Ms Newling were genuinely disabled she would have had the surgery. The evidence before MetLife did show that as at 2010 Ms Newling had decided to have the surgery. Although she was then hoping to have it paid for by workers’ compensation, the failure of her “appeal” (if that is what happened) did not necessarily rule it out. She may have received benefits as a result of discharge from the Police Force. Even if she lacked funds to pay for private surgery, Dr Crowle had raised the possibility of having the surgery done in a public hospital.

66. [201]

    In my view, it was reasonably open to MetLife to think that this was something which Ms Newling should explain. Her evidence did not do so. Although Dr Pillemer recorded Ms Newling as being frightened of surgery in 2014, there was nothing from Ms Newling to explain her apparent change of mind since 2010. In my view, the comment made by MetLife was reasonably open.

67. [202]

    As to the psychiatric issue, Metlife was generous in saying that Dr Smith had “consistently maintained” Ms Newling would be unable to return to work because of her psychiatric condition. Dr Smith’s report of October 2012 (see [52] above) did not rule out a return to work. It was only in his 2013 and 2014 reports (see [71] and [79] above) that Dr Smith stated that Ms Newling’s psychiatric condition was permanently disabling. But this was a matter of dispute. Dr Ng in his February report accepted Dr Smith’s diagnosis but that it was in circumstances where he had been unable to elicit full information from Ms Newling from which to make his own diagnosis (see [55]-[56] above). In his August report he raised the possibility that Ms Newling had no serious psychiatric condition at all.

68. [203]

    Dr Smith observed in his 2013 report in reply that it was difficult to diagnose a psychiatric condition from surveillance. His comments on the surveillance (apparently formulated with the assistance of Ms Newling) also suggested that the observations in the video were consistent with his diagnosis.

69. [204]

    These observations did not wholly respond to what Dr Ng had said. Dr Ng did not base his opinion solely on the surveillance. Even before seeing the surveillance, Dr Ng concluded in his February 2013 report that there was no psychiatric barrier to Ms Newling working up to twenty-four hours per week. Dr Smith made no response to this apart from a bald disagreement.

70. [205]

    Dr Smith also rejected the suggestion in Dr Ng’s February 2013 report that Ms Newling might have been under-treated. This was picked up by counsel before me. But Dr Ng’s comment about under-treatment had to be understood in context. In his February 2013 report, Dr Ng explained that Ms Newling was trying to deal with her emotional problems by forgetting about her time with the Police Force and trying to move on. What Dr Ng was saying was that this strategy might succeed, in which case there was no reason why Ms Newling could not work for someone other than the Police Force in the future. Alternatively, if the strategy of trying to forget about the Police Force failed, because she had been relatively under-treated, there was a possibility that more intensive treatment might allow her to work. In my opinion, Dr Smith’s response did not meet this argument.

71. [206]

    Ms Newling’s psychiatric claim raised issues which were quite different from claims of post-traumatic stress disorder of the type considered by Robb J in Hellessey v MetLife Insurance Limited (2017) 19 ANZ Ins Cas 62-152; [2017] NSWSC 1284. Dr Smith’s initial report of October 2012 described an “adjustment disorder” with features of depression and anxiety arising out of the allegedly unreasonable behaviour of Ms Newling’s superiors at the Marine Area Command. It was legitimate to ask why this episode should have given rise to a psychiatric condition persisting indefinitely into the future even after Ms Newling had ceased to work at the Marine Area Command and left the Police Force entirely. This was especially so when Ms Newling had eighteen years’ experience in the Police Force when her dispute with Ms Thommeny arose, and, on the account presented by Dr Smith in his October 2012 report and presented by Ms Newling herself in her February 2014 statement, she had had a very successful career up to that point.

72. [207]

    Dr Ng was making the common-sense point that even if Ms Newling’s experiences at the Police Force prevented her from working for the Force again, they would not necessarily prevent her from working for other employers. Dr Smith may have had a compelling, or at least plausible, answer to that point based on his treatment of Ms Newling. But if so, he did not express it.

73. [208]

    Dr Ng’s alternative point was that if Ms Newling’s difficulties proved intractable, further treatments were available. Although Dr Smith disagreed with this, he did not really answer it. His response was just a bare denial. He did not explain why other treatments would not be available or were unlikely to be effective.

74. [209]

    Counsel emphasised that Dr Smith was Ms Newling’s treating psychiatrist. The argument was that in any conflict between Dr Smith and Dr Ng, Dr Smith’s opinion should be preferred as he was more familiar with Ms Newling’s circumstances. But the weight of this argument (which was clearly and repeatedly put on Ms Newling’s behalf by WMJ: see [93]-[95] above) was a matter for MetLife. It was open to MetLife to regard Dr Ng’s report as more persuasive (noting that the “onus” lay on Ms Newling and it would have been sufficient had Metlife thought that Dr Ng’s report left the extent of Ms Newling’s disabilities, if any, in doubt).

75. [210]

    This is sufficient to justify MetLife’s conclusions on the psychiatric issue. But in my view there were other factors which could reasonably have supported a refusal to accept Dr Smith’s conclusions.

76. [211]

    Dr Smith’s account of the dispute between Ms Newling on the one hand and Ms Thommeny and Mr Hutchings on the other which precipitated her claims of harassment and bullying were presented by Dr Smith entirely from Ms Newling’s point of view. Dr Smith had only heard one side of the story. He had no objective means of knowing that Ms Newling’s record of service with the Police Force was “outstanding” and to offer an opinion to that effect (see [48] above) was gratuitous. Similarly, he had no objective grounds to criticise the evaluation which had found Ms Newling’s superiors’ conduct reasonable or to suggest that there had been a lack of “balanced perspective” (see [49]-[51] above).

77. [212]

    It might be said that the only aspect of the dispute between Ms Newling and Ms Thommeny which was relevant to treating Ms Newling was her subjective reaction. But if that is so, why did Dr Smith go into the objective circumstances at all? In my view, his approach could properly be seen as partisan.

78. [213]

    I think Dr Smith’s report of August 2013 also had an element of advocacy in it. There was a tendency to focus on points which would help Ms Newling’s claim, whether they were within Dr Smith’s expertise or not. Thus, although Dr Smith stated that he would defer to the opinions expressed by Dr Robinson on orthopaedic matters, he immediately stated that pain could be difficult to detect from video surveillance. This seems understandable as a matter of common sense but it was not part of Dr Smith’s area of expertise and tended to distract attention from the conclusions, which were within Dr Robinson’s expertise, about the lack of clinical evidence for Ms Newling’s claimed difficulties. Dr Smith also went out of his way to refer to what Dr Robinson said about psychiatric matters when this was plainly not within Dr Robinson’s area of expertise at all.

79. [214]

    The point is not so much the accuracy of what Dr Smith was saying, but his choice to comment on matters outside of his expertise and to do so in ways which favoured Ms Newling’s claim.

80. [215]

    Dr Smith also expressed his opinions in ways which were gratuitously critical of the independent experts retained by MetLife. He described Dr Ng’s opinion about Ms Newling returning to work as “speculation at best” (see [69] above). He described reliance on the video surveillance as “excessive” (see [71] above). But if, as Dr Smith stated, he was deferring to Dr Robinson’s opinion on orthopaedic matters, he was in no position to say that the opinions Dr Robinson drew from the surveillance were unjustified. His observations were open to the interpretation that Mr Smith was denigrating those whose opinions he did not want to see accepted.

81. [216]

    More fundamentally, there were aspects of Ms Newling’s psychiatric claim which invited scepticism, or at least further explanation. Ms Newling never sought to explain or justify her refusal to supply information to Dr Ng. Nor did she make any response of her own to the suggestion that the surveillance undercut her claim. Even if Dr Smith had been right in saying that the surveillance was not inconsistent with what had been reported to him concerning Ms Newling’s alleged psychiatric condition, it was not so readily reconciled with the claims made in Ms Newling’s later statement that she was unable to shop because of anxiety in dealing with people and inability to remember things (see [76] above).

82. [217]

    Neither of these points was expressly referred to in MetLife’s letter of 15 July (although the latter point was made in the Information Summary: see [109]-[112] above). But they did arise out of the material provided to MetLife and, in my view, were matters on which an insurer acting reasonably could rely in refusing to accept Ms Newling’s claim.

83. [218]

    In my opinion, there was nothing unfair or unreasonable in MetLife refusing to be satisfied that Ms Newling had a permanent and disabling psychiatric condition which would prevent her from working at all in the future.

84. [219]

    The complaint on behalf of Ms Newling under this head was particularised as:

85. [220]

    The Court of Appeal’s decision in Shuetrim stands for the proposition that the phrase “unlikely ever to engage” in work means what it says. It is not enough to demonstrate on the balance of probabilities that the claimant will not work again; the existence of a “real chance” representing a less than fifty per cent chance will be sufficient to defeat the claim. At the same time a “real chance” is not to be equated to a mere possibility or to speculation on the insurer’s part that the claimant will not work again. Counsel for Ms Newling contended that MetLife’s decision fell into the latter class. It was said that no proper consideration had been given to the real world likelihood or otherwise that Ms Newling would actually find a suitable job which she was capable of doing.

86. [221]

    Counsel submitted that the four job descriptions identified in the Rehab Management Report were, for various reasons, not likely to be available to Ms Newling.

87. [222]

    These submissions, and the equivalent submissions made to MetLife by WMJ (see [96]-[99] above) and FSS (see [127]-[128] above), tended to overlook that the onus was on Ms Newling to provide proof of her inability to work. In the present case, MetLife took it upon itself to obtain a vocational assessment report. But it was not enough for Ms Newling to adopt the defensive posture of seeking to pick holes in the suggestions which were put forward in that report. It was for Ms Newling to prove affirmatively to MetLife’s satisfaction that there was no real chance that she would work again.

88. [223]

    There is no evidence that Ms Newling looked for alternative work after she left the Police Force. Indeed the evidence shows that she made a positive decision in November 2012 to take herself out of the labour market. That does not, of course, mean that she could not establish that she was and would remain unable to find suitable alternative work. But in a case such as this, the best evidence of inability to obtain work would have been evidence of actual unsuccessful attempts to obtain, or to hold down, relevant employment. The second best evidence would have been some form of expert assessment. Ms Newling presented neither of these. In relying solely on opinions from her doctors, which relied critically on what she had told them, she was taking on a difficult task.

89. [224]

    By late 2008 Ms Newling had been working at a desk job in the Police Force for more than a decade. I have already made the point that on her own account (and that of Dr Smith) she worked dynamically and effectively in overcoming any residual effect of her back injury. The vocational assessment which identified a wide range of potentially suitable office jobs as available to Ms Newling accorded with what one would think based on common experience. In Ms Newling’s particulars, reference was made to the fact that the vocational assessment looked at jobs available in Sydney. No point was taken about this by counsel for Ms Newling in the argument at trial, presumably because as at the agreed date of assessment (March 2012) Ms Newling was living in Sydney.

90. [225]

    In my opinion, having regard to the deficiencies in Ms Newling’s case on this point, and the uncertainties about Ms Newling’s claimed disabilities, it was reasonably open to MetLife not to be satisfied that she was unlikely ever to engage in suitable alternative employment in the future.

Questions for determination

1. [226]

   The Court of Appeal decision in Shuetrim authoritatively confirms that it is an essential first stage of the plaintiff’s case to demonstrate, by reference to the material before the insurer, that the insurer’s decision to decline the claim miscarried. The subsequent Court of Appeal decision in Jones authoritatively states the test as being whether the decision was reasonably open to “an insurer”. But I think there remains room for debate about the jurisprudential basis on which the Court acts in these cases, and the implications for the nature of any second stage enquiry, or even whether one is required in all cases.

2. [227]

   One way of analysing the basis for the Court’s intervention characterises the requirement that the decision be made fairly and reasonably as a condition of its contractual validity. Thus if the insurer fails to act fairly and reasonably the ensuing decision is of no contractual effect. This was the analysis adopted by Meagher JA in his concurring judgment in Jones where he said (at [6]):

3. [228]

   But this is not the only way in which the Court’s intervention may be analysed. An alternative analysis focuses on the duty of good faith and fair dealing owed at general law by MetLife as insurer to Ms Newling as the Insured Member under the policy: Sayseng at [36], [47]-[50]; Jones at [67], [69]-[72]. Amendments to the Insurance Contracts Act 1984 (Cth) in 2013 (not relevant in Shuetrim or Jones or in the present case) create a statutory duty to this effect also (see s 13(3)). There seems no reason why breach of this duty would not sound in damages (if a statutory or common law duty) or equitable compensation (if an equitable duty). Thus, if the Court is satisfied as a result of the first stage that the decision to refuse the claim involved a breach of duty, the second stage would be an enquiry into the loss or damage flowing from that breach.

4. [229]

   The difference in analysis is not merely academic. If the first analysis is followed, and the conclusion is that the purported decision is of no contractual effect, then the parties are left in a position where there has been no decision in law. The court may then step in and decide the contractual issue for itself. But it may be open to question whether the court must do so in every case.

5. [230]

   The court’s intervention in such cases has been explained on the basis that the contractual mechanism for determining the claim has broken down as a result of the insurer’s own fault, or at least without the fault of the insured: McArthur v Mercantile Mutual Life Insurance Co Ltd [2002] 2 Qd R 197; [2001] QCA 317 at [63]-[69]; Shuetrim at [181]. But in a case, such as the present, where the insurance contract provides for a right of review, does an invalid decision by the insurer really mean that the contract mechanism has completely broken down? Counsel for Ms Newling pointed out that although MetLife agreed to accept the outcome of any review, the review was not expressed to be binding either on FSS as trustee or on Ms Newling as the insured party. But I do not think that matters for present purposes. The important point is that MetLife undertook to abide by the decision of the CRC, an independent body. The lack of evidence in the present case makes it impossible to know what particular complaints were taken to the CRC and what MetLife’s response was to them. But in principle it should have been possible to address complaints about the fairness or reasonableness of the procedure, or the cogency of MetLife’s expressed reasons for its decision, by way of review to the CRC. Must the Court conduct its own investigation into the facts in such circumstances?

6. [231]

   It is not clear from the report in Edwards whether the policy in that case contained any provision for independent review. The policy in Shuetrim was the same as the policy in this case, but there is no reference to the review power in cl 9 in the judgment. It is not clear from the judgment in Jones whether the policy in that case contained any provision for independent review. In my view, even if MetLife’s decision in this case had been unreasonable or unfair, it would have remained open to question whether the Court should intervene unless satisfied that the CRC process likewise miscarried.

7. [232]

   If the alternative analysis is adopted based on an award of damages for breach of the insurer’s duty, a different set of questions arise. At the second stage the Court is not concerned any more with the decision in fact made; rather the Court must determine what decision would have been made had there been no breach. This raises an issue of causation. If the Court finds that the decision breached the insurer’s obligation of fairness and reasonableness, the Court must determine what the decision would have been had the insurer acted fairly and reasonably. If the Court finds that in that event the claim would have been allowed, then damages can be recovered for the value of the claim. If the Court is not satisfied that the breach made any difference, then the claim will fail.

8. [233]

   Such an approach would result in a second stage enquiry with a different focus. If the flaw identified in the first stage were confined to the reasoning process, then the second stage enquiry should arguably be limited to the material before the insurer. The second stage, like the first stage, would be a purely “paper” exercise and there would be no room for evidence to be given on the actual state of disability and employability of the plaintiff.

9. [234]

   If the breach involved the fairness and reasonableness of the process itself, the factual enquiry would be wider. The Court would have to decide what evidentiary material and what submissions would have been put before the insurer had the process been carried out fairly and reasonably. The Court would then have to decide what decision the insurer, acting fairly and reasonably would have made on that material. But in such an enquiry the actual facts of the plaintiff’s condition would still not be directly relevant; they would be relevant insofar only as they might inform the court’s finding as to the material which would have been put before the insurer. If, for instance, the plaintiff was being represented in his or her dealings with the insurer by solicitors, the critical question would be what the solicitors would have done and the evidence available from the plaintiff would only be relevant to the extent that it could be shown that the solicitors would have put it before the insurer.

10. [235]

    In a case where an independent review was available, arguably it would be necessary to establish causation to show that the review also miscarried, and did so because of the insurer’s prior breach of duty.

11. [236]

    I mention these matters because this judgment deals with proceedings for the separate and preliminary determination of agreed questions. The formulation of such separate questions is a critical step in ensuring the success (in the sense that it will result in a saving of time or costs) of the separate hearing. If orders are to be made for the separate hearing of the first stage, it is essential to understand what it is being decided at the first stage and what will be left for determination at the second stage.

12. [237]

    Typically the argument in favour of a separate hearing is based on the assumption that the second stage will involve an extensive factual investigation to the merits or demerits of the plaintiff’s claim as a matter of fact. That was the way it was put in the application in this case (see Newling v FSS Trustee Corporation [2017] NSWSC 1839 at [4]-[6]). But if the plaintiff puts his or her case on the basis of damages for breach, then the argument for a two stage hearing may evaporate. If the second stage hearing is confined to a “paper” debate about what decision the insurer ought, acting fairly and reasonably, to have made on the material before it there would be no need for a second stage at all; the whole case could be determined on the papers at once. And even if the second stage involves a complaint about the fairness or reasonableness of the procedure adopted it may not be appropriate to hear the second stage separately. There could be considerable evidentiary overlap between a first stage hearing, which, as this judgment illustrates, would require going through the whole of the way in which the claim was presented, and a second stage hearing to determine how the process would have been different if the insurer had behaved fairly and reasonably. On the other hand, if the plaintiff puts his or her case on the basis that the insurer’s decision was of no effect, there may be a debate about whether even if the plaintiff succeeds, there should be a second stage hearing at all.

13. [238]

    The questions for separate determination agreed by the parties in this case were as follows:

14. [239]

    With the benefit of my experience in hearing this case, I regret having made orders in these terms. Question (i) is too open-ended: it asks whether MetLife breached its obligation of good faith or fairness, without any enquiry into whether such a breach made any material difference to the outcome. Question (ii) is open to a similar criticism, and is also limited to reasonableness rather than referring to fairness as well. Question (iii) has the merits of focusing on MetLife’s ultimate decision, but is not expressed in terms of the test laid down in Jones which asks whether the decision was one which was not open to “an insurer” acting reasonably. Instead Question (iii) asks whether the decision was one open to “the [sic] MetLife” acting reasonably.

15. [240]

    With the benefit of hindsight, I think that it was a mistake for the parties to formulate questions in terms taken (whether accurately or not) from court decisions in this area. Instead, the Statement of Claim should have included separate prayers for relief which would flow if Ms Newling succeeded at the first stage hearing (presumably declaratory in nature), and the questions should have been formulated in terms of Ms Newling’s entitlement to such relief.

16. [241]

    I put these concerns to counsel for the parties at the hearing on 12 July, but ultimately they did not take up my invitation to amend the questions, and if necessary the pleadings, so as to deal with the sort of issues I have mentioned in this judgment. They asked the Court to answer the questions as formulated even if there was potential for the answers to lead to further debate about what would happen next. In these circumstances, I considered that I had no alternative but to proceed to deliver judgment answering the questions which the parties asked.

17. [242]

    Question (iv) asks, in substance, whether MetLife failed to determine the claim. For the reasons given at [146]-[148] above the question must be answered “no”.

18. [243]

    Question (i) asks whether MetLife breached its duty to Ms Newling. I have at [149]-[166] rejected the arguments that MetLife was in breach of an obligation to give reasons and I have also at [167]-[174] and [175]-[225] rejected Ms Newling’s arguments concerning the fairness of the process and the reasonableness of MetLife’s reasoning process. Accordingly, the answer to question (i) is “no”.

19. [244]

    Question (ii) asks a more limited question, namely whether MetLife failed to act reasonably in considering and determining its opinion. For the reasons given at [175]-[209] and [219]-[225] above the answer is “no”.

20. [245]

    Question (iii) asks whether MetLife formed an opinion which was not open to it acting reasonably. I have found that MetLife’s decision was reasonably open to an insurer acting reasonably, but the question does not ask that. However, for the reasons referred to under question (ii), I am not satisfied that there is any relevant flaw in MetLife’s decision. Question (iii) will be answered “no”.

21. [246]

    For these reasons, I have concluded that each of the questions posed is to be answered “no”. The parties agreed before the hearing that in that event the proceedings should be dismissed with costs.

22. [247]

    The orders of the Court are: